Friday, February 19, 2010

This is more a philosophical post than it is economic. I want to explore what the real cost of “unfettered opportunity” is.

Most humans want to be free – free to do what they like, within the bounds of law, to do things how they so wish, and to enjoy the rewards of whatever outcome their effort leads to. This is a basic human desire. I also believe that everything worth the effort has to provide a clear upside to those who do, compared to where they are now.

Every culture and every group of people has its own standards of what unfettered opportunity should be. Some groups would allow individuals the endless chance to work harder, to take more risks, to do what others would rather not do, and allow that enterprising individual to reap whatever benefits his work allows him to. Some groups would lean more towards a more harmonious teamwork, where everybody shares in the pain more equally, but also shares in the gains equally as well. Most groups would lean somewhere in between.

In the US, the culture leans more towards individual initiative and individual enterprise. This has been their hallmark, and they have continually trumpeted it as a leading cause of the high success of capitalism there. For capitalism is a system that best functions when people are allowed to have an individualized stake in the outcome, and therefore allows for greater competition to get the spoils.

But at the end of the day, not everyone will emerge the big winner, and along the way, many people who worked, to share in the spoils, may fall along the wayside, casualties of the gritty battle, not for limited spoils, but to corner the largest amount of it.

If you ask a regular guy brought up in the culture that is America, they would say that they would rather have a government that steps out of the way, does not overly tax its citizens, and allows them to keep more of their ‘fair share’. They will not stand for a government that seeks to redistribute income, such that everybody gets to have a more equal share of the common pie. For I believe that it is also true that in that redistributative scenario, many may be tempted to slack off and live off of the burdens of those who work.

However, what are the bounds of unfettered opportunity? Should there be any? Should it also mean that individuals are able to define wholly what their work is, and how it should be done? I ask this because, in a system where everybody is in a rush to get more of the common pie, to get their ‘fair share’ of the spoils, people could often overstep the boundaries of fair play. Moreover, if this rush to get as much as you can becomes an overarching determinant of the work ethic of an entire people, then people are led, incrementally but most assuredly, further and further beyond the boundaries.

Over time, what started off as a simple system that allowed people to work for their own benefit, without the hanging sword of an ever present government looking to take away their gains, becomes a system where only the most ruthless and most clever by half gain everything. This leads to an outcome where the winner eventually takes all.

And yet, despite the obvious disadvantages of such unfettered opportunity, many American have historically seemed to want it that way, in the belief that they will at least have the chance to be the one that gets to take it all. This mentality is no different from the high stakes gambler who seeks to put in every last penny he has in a common pot where only person will end up getting the whole jackpot.

Why does this mentality exist? And why is it so prevalent, or can become prevalent in a culture such as the US? What is it about getting more that makes people want to have the chance to have it all, even if the chances of one’s being the one to get it are slim?

Or maybe nobody actually believes that there are people ruthless enough to take as much as they can, even though their effort ends up causing a loss to someone else? And by this, I’m not thinking in terms of a zero sum game. I’m thinking in terms of people who would compromise the safety and integrity of an entire system in their quest to win. I’m thinking of the crazed hostage taker willing to blow up an entire building, including himself, unless he gets what he wants. I’m thinking of the cattle farmer who games the buyer, by making cattle drink more water before weighing them (the etymology of the term ‘watering stock’).

Anyway, I’m already jumping topics – the paying of taxes, greed, the commission of fraud. But they all have a common starting point, which is the allowance of unfettered opportunity. I believe that people who work more or risk more should be entitled to greater share of spoils. They should not be taxed for earning more. But I don’t believe that people who, out of greed - will lie, cheat, steal, or commit outright fraud - should be given free pass. Those who end up introducing risk to others or to the system, or causing hardship to others, or putting costs where there was none before - these are the products of a culture where rampant opportunism has run amok.

I think equal opportunity is something that any country should strive to provide its citizens. But in the interest of the common good, there should be boundaries, and there should be harsh consequences to those who decide to cross these boundaries. And I think that something could also be said about taxing the acquisition of wealth beyond what one individual can productively put to use within a realistic lifetime.

4 comments:

Min
said...

Self-reliance is a major American value, and unfettered opportunity gives it scope to work to an individual's advantage. But Americans also believe in equal opportunity, expressed in the metaphor of the level playing field. To continue in the game metaphor, when play is over (at the end of the day), there are winners and losers. Americans see that as just, as long as everyone had equal opportunity.

However, in real life there is no end of the day for society. Individuals die, but the game goes on. And even within the lifespan of individuals, those who are ahead of the game use that advantage to restrict the opportunities of others. The playing field is no longer level. However, the myth of the level playing field is maintained, and, despite some grumbling, the people as a whole accept the situation.

From time to time in American history, however, such as during the Great Depression or the Long Depression of the 19th century, people come to perceive their own opportunity as unjustly fettered, not by government per se, but by the rich and powerful. They see that self-reliance alone is incapable of restoring equality of opportunity, and combine to take collective action.

Community is another American value, which is also strengthened in times of adversity. More could be said, of course, but I wanted to keep to the theme of opportunity. :)

That's a perceptive way to put it, Min. My guess is that the best people can have is a pendulum swing slowly going one way or the other. Nobody knows where the proper bounds in one direction should be, they could only perceive that it's already going too much either in the direction of too restrictive government, or too much unfettered opportunity for those who have that advantage to restrict the opportunities of others.

While you're still somewhere in between, there will be too many people entrenched in the status quo who will object to a change. You either need a Great Depression, or an LBJ Great Society program, to seriously unravel everything.

I think the answer is that everyone in the US is raised with the idea that they have a good chance to be millionaires. We're told we have this chance because we live in the USA, that "anything is possible", and people are justly rewarded for their effort instead of the government redistributing wealth to those who don't work as hard. It's not a true story, 99% of us will never be millionaires, but that dream is perpetuated by the wealthy.

When a stranger is taxed heavily on his million dollars, no one particularly cares. But when we are taxed heavily on a million dollars we've worked hard for, it suddenly seems unfair and socialist-like.

Therefore, the wealthy need to bridge that gap. And they do that by perpetuating they myth that the common man might one day join their ranks; but only by allowing them to own several mansions and a private jet can he one day hope to be as wealthy.

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"Conventional approaches, unconventional conclusions" on the global finance and economic issues of the day. Rogue Econ has been a banker and financial consultant in several countries. Welcome to my blog.